The State Senate’s MTA Financing Plan Doesn’t Add Up

The State Senators (for convenience sake, let just refer to them "The Fare Hike Four" from now on) say they can satisfy the MTA’s short-term financing needs with a four percent fare and toll hike and a small payroll tax increase. The MTA says that math doesn’t work, according to Reuters:

The MTA’s chairman, H. Dale Hemmerdinger, estimated the
Senate plan would force the agency to raise fares and tolls by
17 percent — about four times more than the Senate calculated
— as it would only raise about $1 billion more.

I suppose it comes down to a question of who do you trust more with the numbers, Richard Ravitch or four venal, old pols in the nation’s most dysfunctional state legislature? If that’s a tough call for you, then it’s probably worth noting that Ravitch spent considerably more time working out his financing plan than did The Fare Hike Four. As Kathy Wylde at the Parternship for New York City says:

The State Senate has had almost a year to join the public discussion of funding for the transportation system. They waited until the very end of the process to come forward with a proposal that provides not a nickel for system maintenance and badly needed expansion of bus service, let alone a full capital program. It is time for both sides of the Senate — Democrat and Republican — to join the Governor and the Assembly in support of some version of the Ravitch Commission Plan.

Because it involves the MTA going deeper in the hole, and will force people to pay more indefinately while only paying for ongoing normal replacement (maintenance, really) for FIVE YEARS.

So what happens when something like that gets to the New York State Legislature?

Instead of can you top this, it’s can you sink lower!

Ravitch pandered to them. His report was a Valentine compared with what I would have written. There would have been some forensic accounting alright. Who was better off by how much while that $30 billion in debt was run up? And therefore, who should sacrifice now?

And there would have been NO new debt, except for projects that qualify for federal New Starts funding.

Ongoing normal replacement must been funded by ongoing revenues or the result is a guranteed repeat of the 1970s. And if that is the choice, I would rather have it happen now than later.

Because it involves the MTA going deeper in the hole, and will force people to pay more indefinately while only paying for ongoing normal replacement (maintenance, really) for FIVE YEARS.

Last I checked, Larry, that was not at all clear, and I had asked you to point to the place where it said that. I’m not an accountant, but by my calculations, at 5% interest a $1.5 billion annual income will pay off $30 billion by 2048.

It’s true that it would never pay off $35 billion – 5% interest in 2015 would be more than $1.5 billion – but the interest may not be that high; current bonds (PDF) seem to be more around 4.75%.

Yes, obviously if we’re budgeting for $7 billion a year in capital expenses – and there’s no reason to expect the capital expenses to go down after 2014 – a sustainable funding stream would have to bring in more than $7 billion a year. But as long as the income is greater than the debt service, we will eventually pay it off, and in 2048 or whenever that funding stream will probably be available again, so it’s nowhere near as bad as you make it out to be.

Who else has come out in favor of the Bad Math Four’s plan. Sounds like there were about 28 votes, a majority in the Assembly and the Governor in favor of a somewhat watered down Ravitch Plan.

Looks like Malcolm Smith needs to change the game up. Strict partisanship was the problem with the old Albany – and Smith just doesn’t have the votes. He needs to either go bipartisan or at least find working coalitions on a wide range of issues.

Larry Littlefield

“Yes, obviously if we’re budgeting for $7 billion a year in capital expenses – and there’s no reason to expect the capital expenses to go down after 2014.”

That’s my point. After 2014.

The Ravitch plans proposes to borrow against the future revenues to pay for the capital plan through 2014. Then what?

For the 2005 to 2009 capital plan, among other things, they raised the sales tax for the MTA and borrowed against it. So can we use that sales tax revenue to fund the next capital plan? No, because the future revenues have already been spent.

“But as long as the income is greater than the debt service, we will eventually pay it off, and in 2048 or whenever that funding stream will probably be available again.”

So does that mean that the MTA has paid off enough debt in the past few years that some of the existing funding streams can be used for the next capital plan? No. Because the debt is going in one direction — up.

“It’s nowhere near as bad as you make it out to be.”

If that was true of the future, it would also be true of the past, and we wouldn’t be in this situation.

Another thing — I’m concerned that interest rates are going to explode. The FED is printing money like crazy. If they succeed, we’ll have a big increase in inflation — more than in the 1970s. If they fail, we end up with spiraling deflation. To hit the mark between the two in a wild, unsettle economic situation would take a miracle.

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